LIHTC Compliance

Real Estate Development and Tax Credit Finance 101

Conference

July 29, 2014

• The Louisiana Housing Corporation is responsible for monitoring compliance of reporting requirements, regulatory compliance and ensuring the ongoing physical and financial viability of all LIHTC properties in our portfolio.

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• As an owner or owner’s representative of a LIHTC development, it is your responsibility to ensure that your properties comply with the requirements of all funding agreements, covenants, and other funding conditions.

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• LHC’s multi-family portfolio consists of approximately 46,900 units in 850 properties located throughout the state.

• These properties were funded by Low-Income Housing Tax Credits, HOME and CDBG funding.

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• LIHTC properties are monitored in accordance with:

– Internal Revenue Code § 42, Low-Income Housing Credit

– Treasury Regulations § 1.42-5, Monitoring Compliance with Low-Income Housing Credit Requirements

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Physical Inspections

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Physical Inspections

• Conducted at least once every 3 years

• A random sample of 20% of the project's low-income units inspected (occupied & vacant)

• Includes site, building exterior, building systems, common areas and dwelling units

• Uniform Physical Conditions Standards (UPCS)

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Common Issues

• Exposed Wires• Blocked Exits and Entrances• Smoke Detector Violations• Tripping Hazards• Missing or Expired Fire Extinguishers

To avoid non-compliance issues, pre-inspection

of all units is advised. 8

On-Site File Review

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On-Site File Inspection

• A random sample of 20 % of tenant files are inspected for the following:– Tenant Application– All Related Verification Forms– Tenant Income Certification Form– Certification of Student Status– Lease Agreement

• Same Units as Physical Inspection10

Non-Compliance

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Non-Compliance

• A written notification of non-compliance is provided to the property /owner listing the violation and correction period

• Form 8823, Low Income Housing Credit Agencies Report of Noncompliance is required to be filed with the IRS. 12

LIHTC

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Annual Reporting Requirements for LIHTC

Properties

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Owners Certification

• Under the certification provision, the owner of a low-income housing project is required to certify at least annually to the Agency that, for the preceding 12-month period the project met the requirements listed in Treasury Regulations § 1.42-5.

• Annual Owner Certification of Continuing Program Compliance (Exhibit B to Compliance Monitoring Agreement)

• Annual Owner Tax Credit Compliance Submission (Exhibit C to Compliance Monitoring Agreement)

• Schedule II (A) – Low Income Unit Determination – (one [1] per BIN).

• Documentation to support Utility Allowance • If this is the first year of the compliance period, IRS

Form 8609 with Part II completed (one [1] per BIN)• Due on or before February 15th of each year• Documents along with reporting instructions are

located at www.lhc.la.gov 16

Compliance Monitoring Fee

• The LIHTC Regulatory Agreement states:

– The owner agrees to pay to the Credit Agency, on or before February 15th of each year in the Compliance Period.

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Project Size Minimum Fee1-4 units   $20.005-16 units   $80.0017-32 units $160.00Over 33 units *Minimum fee is equal to 50%

of units in the Project times $10.00 or $5.00 per unit.

• The first payment is due on or before February 15th following the first year in which the project is placed in service.

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Audited Financial Statements

• Annual audits must be received no later than April 1st of each calendar year

• Audits should be submitted electronically to:LIHTCAnnualAudit@lhc.la.gov

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HUD Tenant Data Collection

• The Housing and Economic Recovery Act of 2008 (HERA) requires HUD to collect and report on the following information for LIHTC tenants:– Race; – Ethnicity; – Family Composition; – Age; – Income; – Use of Section 8 (or other) Rental Assistance; – Disability Status; and – Monthly Rental Payment

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HUD Tenant Data Collection

• Tenant data must be submitted electronically through LHC’s HDS Web Compliance Management System on or bef0re August 30th of each year.

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Extended Use Period (Post 15 Year)

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Extended Use Period (Post 15 Year)

• Properties that were awarded Housing Credits on or after January 1, 1990 must comply with Internal Revenue Code Section 42(h)(6):

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Extended Use Period (Post 15 Year)

• The period beginning on the last day of the Compliance Period in which such building is part of a qualified low-income housing project and ending on the date which is 15 years after the end of the Compliance Period or the date specified by the Corporation in the LIHTC Regulatory Agreement.

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Extended Use Period (Post 15 Year)

• During the extended use period, the project must comply with rent and income restrictions

• The extended use period may be terminated pursuant to the terms in the IRC Section 42(h)(6)(E):– Foreclosure; or – The Agency is unable to present a Qualified

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Upcoming Changes

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• LHC successfully secured the approval of the Joint Legislative Committee on the Budget to increase LHC’s monitoring compliance fee from the nation's lowest at $5 per unit to the national average of $33 per unit. 

• LHC will soon implement an online system for ALL annual reporting requirements.

• Property owners / managers will receive notification upon implementation, along with reporting instructions.

• Training will be provided on reporting requirements and the electronic submission process.

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Contact

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Dione MiltonLouisiana Housing

CorporationAsset Management:

Desk Monitoringdmilton@lhc.la.gov

225.763.8700

Frankline KimbengLouisiana Housing

CorporationAsset Management:

Compliancefkimbeng@lhc.la.gov

225.763.8700